Results of the 2021 Climate Biennial Exploratory Scenario (CBES)

The Bank of England (Bank) has published the results of the Climate Biennial Exploratory Scenario to explore the financial risks posed by climate change for the largest UK banks and insurers (participants). This exercise supports the Financial Policy Committee (FPC) and Prudential Regulation Committee (PRC) in the pursuit of their statutory objectives. The financial risks from the physical effects of climate change and the transition to a net-zero economy have the potential to affect the vulnerability of banks and insurers to shocks, and the stability of the wider financial system.

Key messages include:

• Climate change, and the transition to net zero, create risks for businesses and households globally, and so for the financial system.
• The stylised scenarios used in this exercise are illustrations of possible paths for climate policy and global warming, not forecasts.
• Climate risks captured in the CBES scenarios are likely to create a drag on the profitability of UK banks and insurers.